E.piphany to Acquire Octane Software for $3.2 Billion

Customer relationship management solutions provider E.piphany Inc., San Mateo, CA, said yesterday it had reached an agreement to acquire Octane Software Inc., also based in San Mateo, in an all-stock transaction valued at $3.2 billion.

The combined companies would seek to develop broad-based CRM products for e-commerce companies that capitalize on the marketing and personalization capabilities of E.piphany and the online customer interaction capabilities of Octane. Octane provides Web-based customer-interaction solutions that facilitate communications with customers via e-mail, phone, fax and live Web-based text chat.

"Together we can find a new generation of customer relationship management solutions that set the standard for optimizing all customer interactions in real time, whether consumer, partner or supplier, based on fact-based understandings of those customers," said Roger Siboni, president/CEO of E.piphany, at a press conference announcing the acquisition.

He added that the two companies' customer bases, although in similar industries, do not overlap, creating an opportunity for the firms to sell each other's products to existing customers. The two companies have about 125 clients combined, including American Express Co., Charles Schwab & Co., Compaq Computer Corp., GTE and Hewlett-Packard Co.

Scott Nelson, vice president and research director at GartnerGroup, Stamford, CT, said that as more mainstream companies adopted advanced CRM techniques, they would seek multifaceted solutions like those that E.piphany will now be able to provide.

"What these companies want is a common interface," he said. "They don't have a lot of [information services] resources to help, so what E.piphany will offer them is a more broad-based solution. For a lot of clients, it becomes close to being a complete CRM solution."

He compared the merger to the Kana Communications-Silknet merger, announced about a month ago. Silknet is a direct competitor of Octane, and Kana offers services that are similar to those provided by E.piphany. Nelson noted that companies like Silknet and Octane, which account for a small piece of the overall CRM market, can better compete for customers if they partner with companies that provide complementary services.

Investors, however, were not so enthusiastic about the deal. E.piphany's stock, which opened the day at about $248 per share, fell sharply on the news and was trading at about $201 near the close of the day's trading. E.piphany went public last September at $16 per share.

The agreement, which is scheduled to close by the end of the second quarter, calls for E.piphany to issue 12.8 million shares of its common stock to shareholders of Octane, who will then own about 26.5 percent of the combined company on a fully diluted basis.

E.piphany said the combined companies would report losses in the short term.

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